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In 1845 in Paris, Pierre Dupin (Leon Waycoff, aka Leon Ames) and his girlfriend Camille L'Espanaye (Sidney Fox) attend the carnival with another couple, Pierre's roommate Paul (Bert Roach) and Camille's sister (Betty Ross Clarke). The four are in the audience for a strange exhibition, as Dr. Mirakle (Bela Lugosi) displays a large caged ape named Erik (Charles Gemora). Mirakle passionately speaks about evolution and of his own ability to communicate with the ape: "My Life is consecrated to great experiment," he says, "I tell you I will prove your kinship with the ape. Erik's blood shall be mixed with the blood of man!" Mirakle and Erik both take special interest in Camille following the exhibition. We see later that Mirakle is performing ghastly experiments in his home laboratory. After saving a streetwalker (Arlene Francis) from a violent scene on the wharf, Mirakle and his assistant Janos (Noble Johnson) have bound the woman as Mirakle injects her with a painful and deadly serum of blood from the ape.

The origin of Universal's Murders in the Rue Morgue is deeply intertwined with the making of the studio's seminal horror pictures, Tod Browning's Dracula and James Whale's Frankenstein (both 1931). Dracula hit movie screens first, in February, 1931. Following its success, Universal pegged Lugosi as its "horror man" and planned to star him in its next vehicle, an adaptation of the Mary Shelley novel Frankenstein. In his book The Immortal Count: The Life and Films of Bela Lugosi, Arthur Lennig recounts the timeline for the initial plans for the film. In April, Universal bought the rights to the 1927 play adapting Frankenstein, which was written by Peggy Webling and Hamilton Deane. George Melford, who had helmed the Spanish-language version of Dracula, was slated to direct. In late April, Robert Florey was asked to write a screenplay, and since he was a writer-director, he would also be expected to take the helm of that film. This freed up Melford to direct the third projected property of Universal's horror slate, an adaptation of Edgar Allan Poe's short story Murders in the Rue Morgue. As late as May 27, in a story published in Variety, the team of Melford and Lugosi were still scheduled to go ahead with the project following Frankenstein.

In the summer of 1931, Universal's plans for both the Frankenstein and the Murders in the Rue Morgue projects took a turn. The details and the sequence of events have never been clear, but Lennig describes the probable scenario. Of the offer from Carl Laemmle, Jr. to appear in the former film, Lennig says Lugosi "...assumed he would play the doctor, the role that Florey had originally envisioned for him. But that is not what Junior had in mind. He wanted his now famous Count Dracula to inherit the mantle of the Man of a Thousand Faces by playing the monster." Accounts vary, but Lugosi was to say that he turned down the monster role because it was not a speaking part; others claim that at the time he threw himself into the preparations. What is known is that Florey, working with Garrett Fort, completed a draft of a screenplay for Frankenstein, and shot a make-up test with Lugosi (as the monster), Edward Van Sloan, and Dwight Frye. This footage, shot over two days June 16th and 17th - of 1931, is long-gone and much-discussed among horror fans. Apparently, though, it pleased Universal producer Carl Laemmle, Jr. enough to give Florey's vision for the film the go-ahead, with an A-budget. Just two weeks later, however, the production slate had changed; British director James Whale completed Waterloo Bridge (1931) much to the satisfaction of the studio brass, and was given his choice of follow-up project. Whale chose Frankenstein, and as Lennig writes, "Florey, lower down on the totem pole, was unceremoniously dropped." Laemmle pulled Melford from the Rue Morgue project and assigned Florey instead. While scheduling would have allowed Lugosi to act in both films, Whale gave the role of Frankenstein's Monster to fellow Britisher Boris Karloff, as was announced to the press in August, 1931.

In the original pressbook for Murders in the Rue Morgue, the studio publicity machine claims that "it is said that Lugosi refused to play Frankenstein because of the necessity of putting on the unrecognizable makeup which Boris Karloff wore and also because of the fact that Frankenstein didn't speak lines." The film was now planned as a B-budget picture. Universal had reported a large deficit in the third quarter of the year, and as a result, the budget for Murders in the Rue Morgue was slashed from $130,000 to $90,000. (By comparison, Frankenstein had cost over $290,000). Prior to shooting, Universal supervisor E. M. Asher had planned to economize by changing the setting for the film from Mid-Nineteenth Century to modern day (as was successfully done with Dracula). Florey objected, based on the fact that Dr. Mirakle's shaky science would be too outrageous in 1931. Besides, Florey pointed out that the 1845 Paris setting would not stretch the budget. Biographer Lennig points out that Florey "...had been one of King Vidor's helpers on MGM's lavish production La Boheme (1926). 'The costumes,' said Florey, 'worn by the stars, bit players and extras had been kept at the Western Costume Company and being aware of it I had adapted the Poe story to the same period, the only wardrobe expense of Universal being the cost of the rental.'"

Owing to Florey's powers of persuasion and Junior's desire for an effective follow-up to Frankenstein, the budget for Murders in the Rue Morgue was again increased. Following the initial shooting, it was determined that the picture needed a more exciting climax, so 10 days of retakes were ordered. The chase-over-the-rooftops scenes were shot in December, 1931, and the total cost of the film came to $190,099. Universal executives continued to second-guess the movie; prior to release, events in the first reel were reordered. Initially, the film was to open with Dr. Mirakle's startling abduction and torture of the streetwalker. This scene was moved further into the film, which now opened with Dr. Mirakle exhibiting Erik the ape at the carnival. (Universal Horror fans have since argued convincingly that this reordering has only diluted the power of both scenes).

Reviews of Murders in the Rue Morgue were mostly tepid; typical was the Motion Picture Herald writer who said "there is not as much fast action and thrills as might have been expected." Many critics found the romantic scenes to be "hokum," but most found favor with Lugosi's delightfully over-the-top characterization. Photoplay said that "although folks who like the repressed school of acting will get a little annoyed with his tactics, [Lugosi] is, nevertheless, the perfect type for this sort of film."

In the overview Universal Horrors: The Studio's Classic Films, 1931-1946, Tom Weaver is harsh in his assessment of the film, calling it "a stilted and pretentious triumph of style over substance." Weaver writes that the film's "eccentric niceties of production don't compensate for the poor script and the poor acting," and that it "...puts the lie to the statement that Robert Florey should have been allowed to direct Frankenstein; in fact, rather than having us pining for a Florey-directed Frankenstein, the film instead has us yearning for a George Melford-directed Rue Morgue!"

Florey's deal with Universal was for one picture, so when Murders in the Rue Morgue proved to be a box-office disappointment, he was not asked to return. Universal's next important horror feature, The Mummy (1932), was directed by Karl Freund - the German cinematographer responsible for the wonderful look of Murders in the Rue Morgue. Florey was prolific in the 1930s, directing a variety of mostly unmemorable programmers at Warner Bros. and Paramount. His assignments slowed in the 1940s, but they included two memorable outings, both starring Peter Lorre: The Face Behind the Mask (1941) for Columbia Pictures, and The Beast with Five Fingers (1946) at Warners. Eventually finding a home in television, Florey went on to direct episodes for a number of drama series, including such genre anthologies as The Twilight Zone, Alfred Hitchcock Presents, The Outer Limits, and Thriller.

Bela Lugosi lost out on his chance to be Universal's top horror star upon the release of Murders in the Rue Morgue; the studio instead put its publicity machine behind Boris Karloff to the point of giving him the one-word billing of "Karloff." Lugosi did not remain idle long. Following unforgettable turns in White Zombie (1932) and Island of Lost Souls (1933), Lugosi was paired with Karloff in the first of several horror star team-ups, The Black Cat (1934).